This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the bottom of any article.

May 20, 2013

A Succession Plan That Started at the Gym

The principals at Lof Lopez did it right, and will be reaping the benefits for years to come

Certain professions and areas of study translate well to financial planning. Engineering? Absolutely. Psychology? You bet. But personal training?

“I was Larry’s personal trainer,” Chris Lopez said at Cambridge Investment Research’s Premier Club Conference on Monday in Colorado Springs, Colo. when reflecting on how he met partner Larry Lof. “I was looking to get into a career and was about to get married. I told Larry that I had interviewed with MetLife, and he said, ‘Aw, you don’t want to work for Snoopy.’ He recognized in 1998 and 1999 that succession planning was important and wanted to turn his business into an asset for his family.”

“I recognized that Chris was smart; he had a degree in exercise physiology and a master’s in education,” Lof added. “More important, he was a people person.”

Lopez, now the managing partner and co-founder of Lof Lopez Retirement Income Specialists in Tuscon, Ariz., is a former football player from the University of Arizona who still looks like a linebacker. He started on April 3, 2000.

“Larry had planned to mentor me, but at the top of the market, it was baptism by fire,” he said. “Larry had a phone on each ear, so I concentrated on streamlining and improving the office’s efficiency, mainly through technology. Looking back, it was the best thing that could have happened. I got to watch his ethics and integrity in managing clients through a down market.”

The firm is structured so that Lof and Lopez are equal partners. It also has three associate planners who each take a third of the client load.

“In this way, clients have three CFPs on their case; myself, Chris and one of the associate planners,” Lof, the firm’s president, explained.

In 2010, Cambridge, through its CPG subsidiary that’s meant to match older and younger advisors for the purpose of succession planning, valued the practice at $2.6 million, but Lof knocked it down to $2 million. He then sold half to Lopez for $1 million. Lopez borrowed $400,000 for financing from Cambridge, and Lof carries the rest in a note.

“I could then tell clients, ‘I will be around for as long as I can effectively function, and we have a plan in place for after that,’” Lof said.

“Our age disparity [Lof is 68, Lopez is 40] was a real benefit,” Lopez added. “The continuity it offered was huge.”

Lof said another thing he liked about Lopez was that “he was a blank slate. He didn’t come with baggage and bad habits. The personalities fit.”

The firm currently has $94 million in assets under management and 400 clients, although only about 120 of them are financial planning clients.

“You always have the people that will just want to come in and invest,” Lof said. “But our true core is around 120 clients.”

“Because the personalities fit so well, there are certain things neither one of us like to do, so they wouldn’t get done,” Lopez concluded. “The key is to recognize your weaknesses and account for them in the other people you hire.”